Treasury Inflation-Protected Securities (TIPS)
What is it? U.S. Treasury bonds that are indexed to the Consumer Price Index. TIPS are a guaranteed hedge against inflation because the principal grows at the same rate as inflation. On the other hand, if there is deflation, the principal is adjusted downward. The principal is returned to the investor at maturity, which can be from one to 30 years. Introduced only a few years ago, TIPS are attractive to conservative investors who want to beat inflation without the risk of investing in the stock market. The market for TIPS is still thin, however, and they are not as liquid as traditional Treasury bonds.Added By: Amanda
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